IRR Incremental Analysis of Fuel Facility Construction Projects - Juanda Airport Terminal 2

Dimas Bagus Satriyo Wibowo, Ervina Ahyudanari

Abstract


Indonesia is the largest archipelago country in the world so that Indonesia's need for air transportation cannot be avoided. The demand for air transportation services increases in line with the increase in population and the level of welfare of the people. At Juanda Airport until the end of 2013 the number of passengers exceeds the capacity of the existing terminal. Overcoming this problem, PT Angkasa Pura I developed Terminal 2 of Juanda Airport, which began operating on 14 February 2014. With the development of facilities and flight facilities for Juanda Airport, aviation fuel supply needs have also increased. PT Pertamina (Persero) through the Aviation business unit as a provider of jet fuel at Juanda Airport, supports the development of the airport facilities. The investment carried out in 2017-2020 are the installation of a hydrant system pipeline for Terminal 2 and the addition of a storage tank to increase coverage days in the Depot Pengisian Pesawat Udara (DPPU) Juanda planned to begin in 2020. Until December 2019 the hydrant system project progress has reached 96%, but there has been a decline flight frequency since December 2018 due to partial closure of routes by airlines, reduction in flight frequencies and a decrease in jet fuel prices at market demand, so it is necessary to decide whether or not to continue investing in tank construction. Therefore, capital budgeting analysis is carried out using the incremental Internal Rate of Return (IRR) method between hydrant project investments and tank construction compared to hydrant projects without tank construction. The results of the incremental IRR analysis showed an IRR of 9.81% while the MARR used was 10.38%.

Keywords


Airport; Capital Budgeting; Jet Fuel

Full Text:

PDF

References


I. S. Syarief, “Tiket Pesawat Mahal, Frekuensi Penerbangan Pun Turun Hingga 15 Persen,” 2019. [Online]. Available: https://ekonomibisnis.suarasurabaya.net/news/2019/220851-Tiket-Pesawat-Mahal,-Frekuensi-Penerbangan-Pun-Turun-Hingga-15-Persen.

A. Graham and P. Morrell, Airport finance and investment in the global economy. 2016.

H. Morphet and A. Copeland, “Converting emerging market growth into investment opportunities,” Connectivity and growth Issues and challenges for airport investment, pp. 16–19, 2015.

R. Sturtz and G. Smith, “Fuel Consortia: A 30-Year Success Story,” 2010 Aviation Special Report, pp. 10–11, 2010.

B. Miller and J. Heimlich, “Guidance for Selling Alternative Fuels to Airlines,” 2013.

M. W. Tretheway and K. Markhvida, “Airports in the Aviation Value Chain: Financing, Returns, Risk and Investment,” Roundtable Expand. Airpt. Capacit. under Constraints Large Urban Areas, pp. 1–27, 2013.

C. Davidson, E. Newes, A. Schwab, and L. Vimmerstedt, “An Overview of Aviation Fuel Markets for Biofuels Stakeholders,” 2014.

US Energy Information Administration (EIA), “Reductions in Northeast Refining Activity : Potential Implications for Petroleum Product Markets,” 2011.

R. Bacon and M. Kojima, “Energy Sector Management Assistance Program Coping with Oil Price Volatility,” p. 160, 2008.

Board of Airline Representatives of Australia, “Submission to the Productivity Commission - the competitive supply of jet fuel Overview of BARA,” no. September, 2018.

H. Peter, K. Lewis, and F. Sara, “Refinery to Wing: Transportation Challenges Associated with Alternative Jet Fuel Distribution,” no. 4, pp. 1–6, 2017.

BPH Migas, “Statistik Minyak dan Gas Bumi,” 2017.

B. Behmiri, N. P. Manso, and J. Ramos, “Crude Oil Price Forecasting Techniques: A Comprehensive Review of Literature,” SSRN Electron. J., pp. 1–32, 2013.

X. J. He, “Crude Oil Prices Forecasting: Time Series vs. SVR Models,” J. Int. Technol. Inf. Manag., vol. 27, no. 2, p. 25, 2018.

Annual Energy Outlook (AEO) 2002, “All Fuels Demand and Price Forecast Methodology,” Atlantic, no. June, pp. 1–20, 2002.

E. F. Brigham and J. F. Houston, Fundamental of Financial Management 10th Edition. 2003.

S. A. Ross, R. W. Westerfield, and J. Jaffe, Corporate Finance, 10th ed. McGraw-Hill, 2013.

P. Kalekar, “Time series forecasting using Holt-Winters exponential smoothing,” Kanwal Rekhi Sch. Inf. Technol., no. 04329008, pp. 1–13, 2004.

H. R. te Raa, W. J. Ockels, J. A. Melkert, T. A. Snijders, and W. W. A. B. van Blokland, “Bio jet fuel from macro algae,” no. April 2015, 2011.

I. N. Pujawan, Ekonomi Teknik, 2nd ed. Surabaya: Guna Widya, 2009.




DOI: http://dx.doi.org/10.12962/j23546026.y2020i3.11203

Refbacks

  • There are currently no refbacks.


View my Stat: Click Here

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.